Fed ON RRP Drain and Quantitative Tightening Offset (2013–2026)
Between 2022 and 2025, approximately $2.55 trillion drained out of the Fed’s reverse repo facility — an outflow that tracked cumulative quantitative tightening with a 0.96 correlation.
The ON RRP facility accumulated $2.55 trillion in money-market fund cash between 2021 and 2022, then released nearly all of it as the Fed simultaneously reduced its balance sheet by $2.26 trillion. This dataset tracks the parallel trajectories of these two flows and their aggregate effect on financial system liquidity.
The Federal Reserve’s Overnight Reverse Repurchase Agreement (ON RRP) facility has recorded 3,222 daily observations since its inception in 2003. Between March 2021 and December 2022, usage rose from near zero to $2,554 billion as money market funds parked excess cash at the Fed. Beginning in early 2023, this balance drained almost entirely, releasing approximately $2.55 trillion back into the financial system over a period during which the Fed simultaneously reduced its balance sheet by $2.26 trillion through quantitative tightening. This page provides a structured dataset tracking both flows on a weekly basis, with a proprietary net-effect column measuring their combined impact on circulating liquidity.
The Fed’s ON RRP facility drained $2.55 trillion between its December 2022 peak and April 2026 — closely tracking and slightly exceeding the $2.26 trillion in cumulative QT over the same period (correlation: 0.96). The net effect was approximately $294 billion in additional circulating liquidity despite the tightening cycle. Note: this dataset measures aggregate flows between Fed liability categories — it does not measure credit conditions, fiscal impulse, or earnings growth, all of which independently influenced asset prices during this period (see Methodology and Limitations).
ON RRP Outstanding
Fed Total Assets
Cumulative QT
Net Effect (QT + Drain)
- The ON RRP drain closely offset QT. Between the ON RRP peak (December 2022) and April 2026, approximately $2.55 trillion drained from the facility while the Fed reduced its balance sheet by $2.26 trillion — a near dollar-for-dollar offset in aggregate terms (correlation: r = 0.96).
- The Fed confirmed the offset. The Federal Reserve’s February 2025 Monetary Policy Report stated that “the reserve-draining effect of balance sheet runoff was largely offset by a $1.8 trillion decline in balances at the ON RRP facility.”
- The S&P 500 rose 71% during QT. From June 2022 (QT start, S&P at 4,101) to April 2026 (7,023), equities rallied despite the largest balance-sheet reduction in Fed history. The net-effect column shows circulating liquidity was never meaningfully reduced.
- QT ended when the buffer ran out. The Fed halted Treasury QT on December 1, 2025, by which point ON RRP balances had fallen below $3 billion — effectively eliminating the non-disruptive source of liquidity absorption.
- Dataset: 657 weekly observations covering September 2013 to April 2026, with 8 columns including the proprietary net-effect measure. Licensed CC BY 4.0.
657 observations · Weekly · Sep 2013 – Apr 2026 · CC BY 4.0 ·
Methodology ·
Cite this dataset
Observations
ON RRP Peak
Cumulative QT
Drain–QT Correlation
Offset Ratio
S&P 500 During QT
Chart: ON RRP Facility Outstanding (2013–2026)
Fed Overnight Reverse Repo Facility: From $2.55 Trillion to Near Zero
3,222 daily observations. The facility accumulated $2.55T in money-market fund cash (2021–2022), then released nearly all of it during the QT period (2022–2025).
The ON RRP facility experienced a complete cycle: from negligible usage pre-2021, to a $2.55 trillion peak at year-end 2022, to effective depletion by early 2026. This rise-and-fall occurred entirely within the 2021–2025 monetary policy cycle.
Sources: Federal Reserve Bank of New York (RRPONTSYD via FRED). Chart: Eco3min Research.
How to Read This Chart
The y-axis shows the daily outstanding balance at the Fed’s ON RRP facility in billions of dollars. The shaded red region marks the QT period (June 2022 through December 2025). Before 2021, the facility operated at relatively low levels — typically under $500 billion at quarter-ends. The dramatic build-up began in March 2021, when the expiration of pandemic-era supplementary leverage ratio (SLR) exemptions coincided with declining Treasury bill supply, pushing money market funds toward the Fed’s facility as a parking mechanism. For context on how the Fed balance sheet evolved during this period, the total assets peaked at $8,966 billion in April 2022.
The subsequent drain — from $2,554 billion in December 2022 to under $1 billion by mid-2026 — occurred as money market funds shifted their portfolios toward higher-yielding Treasury bills and private-market repurchase agreements. This shift was facilitated by elevated short-term Treasury issuance and an ON RRP rate that became less competitive relative to market alternatives. The 3-Month Treasury Bill yield consistently exceeded the ON RRP rate during the drain period.
The Offset: How ON RRP Drainage Absorbed the Impact of Quantitative Tightening
The standard narrative of the 2022–2025 tightening cycle holds that the Federal Reserve simultaneously raised interest rates and reduced its balance sheet, thereby tightening financial conditions from two directions. The interest rate channel operated as expected: the federal funds rate rose from near zero to 5.25–5.50%, and credit-sensitive sectors responded accordingly. But the balance-sheet channel — quantitative tightening — produced far less financial stress than historical precedent or the Fed’s own models suggested.
The data reveals a straightforward mechanical explanation. Between December 2022 and April 2026, the Fed reduced its balance sheet by approximately $2,260 billion through securities runoff. Over the same period, $2,554 billion flowed out of the ON RRP facility and back into the broader financial system. In aggregate terms, the outflow from the ON RRP more than replaced the reserves drained by QT. The correlation between cumulative QT and cumulative ON RRP drainage is 0.96 over the January 2023 – April 2026 period.
Mechanistic distinction. QT and ON RRP drainage operate through different channels and affect different counterparties. QT reduces bank reserves by redeeming securities from the Fed’s portfolio — a contraction in the banking system’s aggregate balance sheet. ON RRP drainage, by contrast, involves money market funds moving cash from the Fed back into the private repo market or Treasury bills — a shift between non-bank institutions and markets. These are not fungible flows, and characterizing them as a “dollar-for-dollar offset” is a first-order approximation, not a complete accounting of their respective transmission mechanisms.
What this dataset does not measure. The net-effect column measures the aggregate change in Fed liabilities attributable to QT and ON RRP flows. It does not measure credit conditions, risk appetite, fiscal impulse, corporate earnings growth, or any of the other factors that drove equity markets during this period. The S&P 500’s 71% gain during QT reflected multiple drivers — including AI-related investment enthusiasm, strong corporate earnings, and resilient consumer spending — of which the liquidity offset was only one.
The ON RRP drain released approximately $2.55 trillion into the financial system between December 2022 and April 2026 — slightly exceeding the $2.26 trillion drained by QT. The correlation between the two cumulative flows is 0.96.
The Mirror Image: Visualizing the Parallel Trajectories
Cumulative QT vs. Cumulative ON RRP Drain (April 2022 – April 2026)
The near-perfect symmetry between the Fed’s balance-sheet reduction and the ON RRP drainage, with a correlation of r = 0.96 over the drain period.
The red area (QT) and blue area (RRP drain) are near-mirror images. The gold dashed line — the net effect — hovers near zero throughout the period, indicating that the aggregate reserve-draining impact of QT was approximately neutralized by the ON RRP outflow.
Sources: Federal Reserve (WALCL, RRPONTSYD via FRED). Chart: Eco3min Research.
A legitimate analytical qualification is that the “mirror image” is partly mechanical, not coincidental. Both flows are driven by the same underlying dynamic: as the Fed tightened monetary policy, short-term interest rates rose, making the ON RRP rate less competitive relative to Treasury bills and private repo. Money market funds naturally reallocated from the ON RRP to higher-yielding alternatives. Meanwhile, QT proceeded on a pre-announced schedule. The parallel trajectories reflect a common policy driver, not an independent offsetting force. The ON RRP did not “counteract” QT by design — rather, the same monetary tightening that drove QT also created the conditions for ON RRP drainage.
This qualification, however, does not diminish the aggregate liquidity effect. Regardless of the causal mechanism, the practical consequence was the same: the net reduction in circulating liquidity was far smaller than the headline QT figure suggested. Analysts who tracked only the Fed’s balance sheet overstated the tightening impulse. The Net Liquidity Index — which subtracts both the TGA and ON RRP from total Fed assets — captured this dynamic in real time. For additional context on how this liquidity picture interacted with credit markets, see our credit spread analysis.
Quarterly Progression: QT vs. ON RRP Drain
| Quarter | Cum. QT ($B) | Cum. RRP Drain ($B) | Net Effect ($B) | Offset Ratio |
|---|---|---|---|---|
| 2023 Q1 | −260 | +289 | +29 | 1.11 |
| 2023 Q2 | −625 | +609 | −16 | 0.97 |
| 2023 Q3 | −963 | +1,111 | +148 | 1.15 |
| 2023 Q4 | −1,253 | +1,735 | +482 | 1.38 |
| 2024 Q1 | −1,481 | +2,035 | +555 | 1.37 |
| 2024 Q2 | −1,734 | +2,064 | +330 | 1.19 |
| 2024 Q3 | −1,885 | +2,138 | +252 | 1.13 |
| 2024 Q4 | −2,080 | +2,373 | +294 | 1.14 |
| 2025 Q1 | −2,225 | +2,312 | +87 | 1.04 |
| 2025 Q2 | −2,303 | +2,343 | +40 | 1.02 |
| 2025 Q3 | −2,357 | +2,525 | +168 | 1.07 |
| 2025 Q4 | −2,325 | +2,448 | +123 | 1.05 |
| 2026 Q1 | −2,308 | +2,553 | +245 | 1.11 |
The offset ratio remained between 0.97 and 1.38 across all 13 quarters of the QT period. In no quarter did cumulative QT significantly exceed cumulative RRP drainage. The aggregate net effect was positive throughout — meaning the system received more liquidity from the RRP drain than it lost to QT.
Chronology: Five Phases of the ON RRP Cycle
Phase 1 — Pre-Facility Era (2013–2020)
The ON RRP facility was introduced in September 2013 as a temporary tool to support the Fed’s control of the federal funds rate during its exit from quantitative easing. Usage was sporadic and modest — typically limited to quarter-end window-dressing by money market funds. Average daily usage between 2014 and 2019 was approximately $150–300 billion, with sharp but brief spikes at fiscal year-ends. The facility was not a meaningful factor in systemic liquidity during this period.
Phase 2 — Build-Up (March 2021 – December 2022)
Three simultaneous forces drove ON RRP usage from near zero to $2,554 billion in under two years. First, the expiration of the pandemic-era SLR exemption on March 31, 2021 reduced banks’ capacity to absorb deposits, pushing excess cash toward money market funds. Second, the Fed’s ongoing asset purchases (which continued until March 2022 at $120 billion per month) created additional liquidity that the banking system could not absorb. Third, the Treasury reduced T-bill issuance as it drew down the Treasury General Account (TGA) from $1.6 trillion to under $100 billion, shrinking the supply of short-term assets available to money market funds. For additional context on TGA dynamics, see our TGA dataset.
Phase 3 — Peak (Late 2022)
ON RRP usage peaked at $2,553.7 billion on December 30, 2022 — a quarter-end observation that included seasonal window-dressing effects. Excluding quarter-end spikes, the sustained peak was approximately $2,200–2,300 billion through late 2022 and early 2023. At its peak, the ON RRP facility held more cash than the entire U.S. high-yield bond market.
Phase 4 — Drain (January 2023 – Late 2025)
The drain phase coincided with — and in aggregate terms offset — the Fed’s QT program. Money market funds shifted their portfolios from the ON RRP to Treasury bills (whose issuance increased substantially as the Treasury rebuilt the TGA after the 2023 debt ceiling resolution) and to private-market repo at rates that increasingly exceeded the ON RRP award rate. The drain accelerated in the second half of 2023, with ON RRP balances falling from approximately $2,200 billion to $700 billion in 12 months. For context on how the VIX remained subdued throughout this period, equity market volatility never registered the level of stress that a $2.3 trillion balance-sheet reduction might historically have implied.
Phase 5 — Depletion and QT Halt (Late 2025 – Present)
By late 2025, ON RRP balances had fallen below $10 billion. The buffer that had absorbed the impact of QT was effectively exhausted. On October 29, 2025, the Fed announced it would halt Treasury securities runoff effective December 1, 2025 — earlier than many analysts expected. The timing was directly linked to the depletion of the ON RRP buffer: with no further non-disruptive source of liquidity absorption available, continued QT risked draining bank reserves below the level consistent with the Fed’s “ample reserves” framework. MBS runoff continued at $35 billion per month.
- ▸ ON RRP at $0.2B: The facility is effectively depleted. Any return above $50B would signal renewed excess liquidity and a potential extension of accommodative conditions.
- ▸ Fed total assets at $6,706B: MBS runoff continues at $35B/month. Treasury runoff halted December 2025. See our Fed balance sheet dataset.
- ▸ Bank reserves at ~$3.2T: The critical threshold for “ample reserves” is estimated at $2.5–2.7T. A decline below $2.8T could trigger renewed funding-market stress. See our bank reserves dataset.
- ▸ Next FOMC meeting: check the Fed Funds rate dataset for the latest policy-rate decision and implications for the ON RRP award rate.
ON RRP Regime Classification
The dataset classifies each weekly observation into one of five regimes based on the ON RRP level and the phase of the monetary cycle. These regimes are observational, not predictive — they describe the state of the ON RRP facility, not what happens next.
The ON RRP operated as a minor tool for rate control, not a significant liquidity vehicle. Quarter-end spikes rarely exceeded $500 billion. The facility was a backstop, not a destination.
Rapid accumulation phase. ON RRP rose from near zero to over $2 trillion in 15 months. Driven by SLR expiry, ongoing QE, and declining T-bill supply.
Maximum facility usage. Money market funds held over $2 trillion at the Fed. The facility functioned as a de facto parking lot for excess system liquidity.
The offset period. ON RRP balances declined as funds rotated into T-bills and private repo. The drain absorbed the liquidity impact of QT, keeping the net effect near zero.
Historical Turning Points
March 31, 2021 — SLR Expiry Triggers the Build-Up
The pandemic-era exemption of reserves and Treasuries from the supplementary leverage ratio expired. Within three months, ON RRP usage surged from near zero to $486 billion (June 7, 2021). Bank deposits plateaued as institutions could no longer absorb excess cash without regulatory cost, redirecting flows toward money market funds and, through them, into the Fed’s ON RRP facility.
June 2022 — QT Begins
The FOMC began reducing the SOMA portfolio at a pace of $47.5 billion per month, rising to $95 billion per month by September 2022. At this point, ON RRP usage stood at approximately $1,965 billion. The two trajectories — QT draining reserves downward, ON RRP draining in the opposite direction — began their parallel paths. The Fed funds rate was simultaneously at 1.50–1.75% and rising.
December 30, 2022 — ON RRP Peak
ON RRP reached $2,553.7 billion — the highest level ever recorded. This was partly amplified by quarter-end window-dressing (surrounding days averaged $2,200–2,300 billion). From this point, the drain phase began.
October 29, 2025 — Fed Announces QT Halt
With ON RRP balances below $20 billion and bank reserves approaching the lower bound of the “ample” range, the Fed announced it would halt Treasury securities runoff on December 1, 2025. The announcement confirmed what the data had been signaling: the non-disruptive phase of balance-sheet reduction was over because the ON RRP buffer was exhausted. The yield curve had already begun to steepen in anticipation.
April 2026 — Current Observation
ON RRP outstanding: $0.2 billion (effectively zero). Fed total assets: $6,706 billion. Cumulative QT since peak: −$2,260 billion. MBS runoff continues at $35 billion per month. The S&P 500 stands at 7,023 — up 71% from the QT start level of 4,101. The net-effect column shows +$294 billion, indicating the system received slightly more liquidity from the ON RRP drain than it lost to QT in aggregate terms.
Methodology
This dataset merges three Federal Reserve data series at weekly frequency (Wednesday-aligned to match WALCL reporting) with supplementary equity-market data. The proprietary contribution is the net-effect column, which measures the aggregate liquidity impact of simultaneous QT and ON RRP drainage.
= (WALCLt − WALCLpeak) + (RRPpeak − RRPt)
Where WALCLpeak = $8,965.5 billion (April 13, 2022) and RRPpeak = $2,553.7 billion (December 30, 2022 — daily peak). A positive net effect indicates the ON RRP drain exceeded cumulative QT; a negative net effect indicates QT outpaced the drain.
Regime Classification
Build-up: March 2021 ≤ date < RRP peak AND level > 0
Peak: level ≥ $2,000B
Drain: $100B ≤ level < $2,000B AND date ≥ RRP peak
Near-Depleted: $10B ≤ level < $100B
Depleted: level < $10B
Dataset Design
| Variable | Type | Unit | Source | Calculation |
|---|---|---|---|---|
| date | date | YYYY-MM-DD | — | Wednesday-aligned weekly |
| walcl_B | float | $B | FRED (WALCL) | Direct (millions ÷ 1000) |
| on_rrp_B | float | $B | FRED (RRPONTSYD) | Nearest daily value within ±4 days |
| sp500 | float | Index | FRED (SP500) + Yahoo Finance | Nearest daily close |
| cumulative_qt_B | float | $B | Derived | WALCLt − 8,965.5 |
| rrp_drain_since_peak_B | float | $B | Derived | 2,553.7 − ON_RRPt |
| net_effect_B | float | $B | Derived | cumulative_qt + rrp_drain |
| on_rrp_regime | string | — | Derived | See classification above |
Python Reproduction Code
# Reproduce this dataset from primary sources import pandas as pd # Download from FRED: RRPONTSYD, WALCL, SP500 rrp = pd.read_csv('RRPONTSYD.csv', parse_dates=['observation_date']) walcl = pd.read_csv('WALCL.csv', parse_dates=['observation_date']) # WALCL peak and RRP peak (daily) WALCL_PEAK = 8965.487 # $B, April 13, 2022 RRP_PEAK = 2553.716 # $B, December 30, 2022 # Resample to weekly (Wednesday-aligned) # Merge with merge_asof, compute derived columns # See full code at eco3min.fr/en/on-rrp-qt-offset-dataset/
Dataset Download & Reproducibility
657 observations · Weekly · September 2013 – April 2026 · Licensed under CC BY 4.0.
Data Sources & References
- Primary Federal Reserve Bank of New York, Overnight Reverse Repurchase Agreements: Treasury Securities Sold (RRPONTSYD via FRED), daily, accessed April 2026
- Primary Board of Governors of the Federal Reserve System, Total Assets: Wednesday Level (WALCL via FRED), weekly, accessed April 2026
- Primary S&P Dow Jones Indices, S&P 500 Index (SP500 via FRED + Yahoo Finance), daily, accessed April 2026
- Reference Federal Reserve, Monetary Policy Report, February 2025 — confirmation that ON RRP decline “largely offset” QT reserve drainage
- Research Kirk, K. and Wong, R. (2021), “The Borrower of Last Resort: What Explains the Rise of ON RRP Facility Usage?”, Federal Reserve Bank of Richmond, Economic Brief 21-43
- Research Federal Reserve Board FEDS Notes (2023), “Money Market Fund Repo and the ON RRP Facility”, December 15, 2023
- Research Jacewitz, S. et al. (2022/2024), Kansas City Fed analysis of ON RRP drivers and bank capital regulation
- Reference Federal Reserve, Statement on Balance Sheet Reduction, October 29, 2025 — announcement of Treasury QT halt effective December 1, 2025
Methodological Limitations
- The net-effect column treats QT and ON RRP drainage as fungible dollar flows. In practice, they operate through different channels (bank reserves vs. non-bank money-market flows) with different transmission mechanisms and velocity.
- The ON RRP peak ($2,553.7B) includes a quarter-end spike. The sustained peak (excluding window-dressing effects) was approximately $2,200–$2,300B. Using the daily peak overstates the “normal” level by approximately $250B.
- Weekly resampling of daily ON RRP data may miss intra-week volatility, particularly around quarter-ends and Treasury settlement dates.
- The dataset does not account for other factors affecting circulating liquidity, including TGA fluctuations, Bank Term Funding Program flows (which peaked at $164B in March 2024), or changes in reserve requirements.
- The S&P 500 column enables simple correlation analysis but should not be interpreted as causal evidence that liquidity drove equity returns. Multiple independent factors — including corporate earnings, AI investment themes, and fiscal policy — influenced equity prices during this period.
- The 0.96 correlation between cumulative QT and cumulative ON RRP drain partly reflects the fact that both are trending series. A correlation between cumulative series is mechanically inflated relative to correlations between changes.
Frequently Asked Questions
What is the Fed’s overnight reverse repo (ON RRP) facility?
The ON RRP facility allows eligible counterparties — primarily money market funds — to lend cash to the Federal Reserve overnight, receiving Treasury securities as collateral. The facility was introduced in 2013 to help the Fed maintain the federal funds rate within its target range. Usage peaked at $2,553.7 billion on December 30, 2022, and has since declined to under $1 billion as money market funds shifted to higher-yielding alternatives.
How much did the ON RRP drain offset quantitative tightening?
Between the ON RRP peak (December 2022) and April 2026, approximately $2,554 billion drained from the facility while the Fed reduced its balance sheet by $2,260 billion. The offset ratio was 1.13 — meaning the ON RRP drain slightly exceeded QT in aggregate dollar terms. The correlation between the two cumulative flows was 0.96. The Federal Reserve itself stated in its February 2025 Monetary Policy Report that the ON RRP decline “largely offset” the reserve-draining effect of QT.
Why did the ON RRP facility drain?
Three main factors drove the drain. First, elevated Treasury bill issuance (as the Treasury rebuilt the TGA after the 2023 debt ceiling resolution) gave money market funds higher-yielding alternatives to the ON RRP. Second, the ON RRP award rate became less competitive relative to private repo rates as market rates rose. Third, the Fed’s rate cuts beginning in September 2024 reduced the absolute return on the ON RRP, further incentivizing rotation into market instruments.
Does this dataset prove that liquidity drove the stock market rally?
No. This dataset measures aggregate flows between Fed liability categories. The S&P 500’s 71% gain during QT reflected multiple independent drivers, including strong corporate earnings, AI-related investment enthusiasm, resilient consumer spending, and expectations of eventual rate cuts. The net-effect column shows that circulating liquidity was not meaningfully reduced during QT, which removed one potential headwind — but this is not the same as proving liquidity was the primary driver of equity returns.
Why did the Fed halt QT in December 2025?
The Fed halted Treasury securities runoff on December 1, 2025 because the ON RRP buffer — which had been absorbing the liquidity impact of QT — was effectively exhausted. With ON RRP balances below $3 billion, continued QT would have directly reduced bank reserves, risking a move below the “ample reserves” level estimated at approximately $2.5–2.7 trillion. The Fed acted proactively rather than waiting for funding-market stress to emerge, as had occurred in September 2019.
Does this analysis account for the difference between QT and ON RRP channels?
Yes, the context section and limitations explicitly acknowledge that QT operates through bank reserves while ON RRP drainage operates through non-bank money-market flows. These are not mechanically identical. The net-effect column provides a first-order aggregate approximation, not a precise accounting of how each dollar flowed through the financial system. For a more detailed decomposition, the Federal Reserve Bank of New York’s detailed H.4.1 release tracks these liability categories separately.
Source
Related Eco3min Research
Last updated — 12 May 2026
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